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September 11, 2020

Build A New, Bigger Warehouse Or Retrofit An Existing One? Warehouse Technologies Hold The Key

The rapid growth in e-commerce around the world puts the customer – business or retail – in the driver’s seat. The adage that “the customer is always right”, often ignored in the past, is once again the law of the land. Any business that ignores this reality does so at its peril. What was a fast-growing trend to online retail became a tidal wave when the world was struck by the coronavirus pandemic. The online sales curve went ballistic when bricks and mortar stores were forced to close. Technology has proven to be of immense benefit to today’s customers, as evidenced by the 55% leap in online retail purchasing in the first seven months of 2020.


A Reluctance To Digitalize

Every industry is aware of this but not every industry has taken advantage of what technology can deliver to the supply-side of the supply/demand equation. Companies are still reluctant to embrace digital transformation for various reasons unique to them and their situation: cost, a lack of understanding at the C-suite level, an “if it ain’t broke, why fix it?” viewpoint. Whatever the reason, none of them is valid enough to ignore how technology, properly applied, can streamline business operations – which often translates into greater profitability, market share, or cost-efficiency.

Warehousing is an industry under extreme pressure today. Many point to the aforementioned rise in online retail as the cause. Warehouse operators and owners have been forced to at least double the square footage of new facilities in recent years in order to store the vast array of goods purchased online.

Yet, to blame e-commerce as the cause of operational problems is not accurate. The real cause, it can be argued, is warehouses that are slow to adopt technology to solve their challenges. Yes, new warehouses must be larger now and closer to final markets to expedite “last mile” delivery in a timely manner; but trying to do that with only manual systems simply doesn’t work and such facilities are quickly overwhelmed by the sheer amount of activity they have to deal with.

Two Paths Forward For Warehouse Operators

To be sure, e-commerce is not a passing cultural phenomenon; the coronavirus ensures that online retail becomes the rule, rather than the exception. It’s here to stay and it’s still growing. Those manually operated warehouses that believe they can carry on as usual are in for a shock when they realize the light at the end of the tunnel is actually an express train bearing down on them.

There are two routes that warehouse operators can take to improve their situation: build bigger facilities to gain efficiency or retrofit existing facilities to be more efficient. Each one has merit but building a new facility represents an enormous capital expenditure. Retrofitting may be the more feasible solution, at least at first glance. Retrofitting doesn’t negate the use of digital solutions. Technology applications designed expressly for the warehouse and distribution center (DC) industry are not merely for new warehouses. They can be incorporated into existing facilities and can generate numerous advantages. Here are two examples:

Speeding the Flow of Goods

Maximizing the flow of goods is the first aim and the biggest benefit from retrofitting an existing manual facility, according to Inside Logistics. Getting more goods in and out is the key to staying on top of rising demand. Technology in the form of Automated Storage and Retrieval Systems (AS/RS) can help greatly by reducing handling times and increasing processing speeds. The key is increasing throughput and eliminating redundant processes.

Solving a Labor Crisis

The warehouse industry is facing a manpower crisis, similar to that in many other industries: not enough workers willing to undertake the physical challenges of warehouse work, especially on the loading docks. As older workers retire, their positions remain vacant. Technology can serve two valuable purposes: it can replace some human labor through robotics and it can serve to attract a young and tech-savvy worker into a role they might never have considered before.

The Role of Digital Warehouse Design

Perhaps the clearest example of the power of technology to streamline an existing facility is through the use of digital warehouse design software. This technology is far more powerful and far less resource-heavy than Computer-Aided Design (CAD) software, while also being much faster, according to a recent report from McKinsey.

The report cites a company that wanted to revamp an existing facility while it was in operation. Using digital warehouse design software, the company was able to “try out” several designs to find one that would optimize material handling, picking methods, and automation solutions.

Creating computer models to test out ideas is not new. While retrofitting is one option, it’s not the only one. Operators who decide to build new can first create a “digital twin” on a computer, test it, tweak the design, and then go ahead with the physical twin. The benefits are extraordinary: the virtual model means an existing facility doesn’t need to be shut down in order to be a “guinea pig” and the final results, according to McKinsey, can mean improved efficiency of between 20% and 25%. An entire warehouse can be digitally constructed and bench-tested in as little as six to 10 weeks.

These are examples of digital transformation at work in the warehouse and DC industry. They produce results for operators hard-pressed to continue to perform efficiently as external pressures quickly lead to internal pressures.

The Common Element Is Technology

Build new or retrofit? There are arguments and solutions for both. But the common element is technology. Solutions exist today that can ensure any warehouse or distribution center operates at peak efficiency, 24 hours a day, seven days a week. From Warehouse Management Systems (WMS) and Transportation Management Systems (TMS) to Manufacturing Execution Systems (MES) and more, software platforms can deliver a wide range of benefits that ultimately flow to the warehouse operator’s bottom line.

Generix Group North America provides a series of solutions within our Supply Chain Hub product suite to create efficiencies across an entire supply chain. Our solutions are in use around the world and our experience is second-to-none. We invite you to call us to learn more.

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